Friday, November 4 2005 15:08 Hrs (IST) - World Time -

New Delhi: Airlines in India got a major relief with the Government extending the Withholding Tax (WHT) exemption for additional six months till March 31, 2006, which will make leasing of aircraft from foreign companies economical.

An ordinance issued on Monday last made necessary amendments in the Income Tax Act for this purpose.

The Government, which had decided to do away with the exemption in the budget this year, extended it first for six months till September to benefit airlines, particularly Indian Airlines and Air India, following representation from them.

With these airlines still on a leasing spree to meet their increasing operation of flights including some new destinations, the Government has extended this tax benefit for another six months till the end of this fiscal.

Indian Airlines and Air India are reported to be planning lease of aircraft including Airbus 320, A-319 and Boeing 777 aircraft to meet the market demand till the acquisition of new aircraft.

While Indian Airlines would be buying 43 aircraft from Airbus at a cost Rs 9,000 crore, Air India and Air India express would be purchasing 68 aircraft from Boeing at a cost of Rs 40,000 crore for their expansion and replacement of some old aircraft.

Extension of the exemption will reduce the cost of leasing aircraft and engines from foreign lessons by up to 40 per cent.

However, the exact financial burden of the tax depends on the residential status of the lesson and the provisions of the double taxation avoidance treaty between India and the country from which aircraft or engines are taken on lease.

As per industry estimate, an airline leasing a new Boeing 737 or Airbus 320 aircraft have to shell out Rs 30 lakh as the withholding tax burden only.